When you’re just starting your investment journey, choosing the right option can be overwhelming. Mutual funds, stocks, bonds, SIPs – there’s a lot to explore. But one option that is increasingly gaining popularity among Indian investors, especially beginners, is the Exchange Traded Fund (ETF).
If you’re wondering “What is an ETF?”, you’re not alone. An ETF or Exchange Traded Fund is a type of investment fund that holds a collection of assets such as stocks, bonds, or commodities. These funds are listed on stock exchanges just like shares and can be bought or sold anytime during trading hours.
Let’s explore why ETFs are a great investment option for beginners in India, and how you can benefit by adding them to your portfolio.
1. Easy to Understand and Invest In
For a beginner, ETFs are simple to grasp. Instead of picking individual stocks and doing hours of research, you can buy an ETF that automatically invests in a bundle of stocks.
For example, a Nifty 50 ETF invests in the top 50 companies listed on the National Stock Exchange (NSE). So by investing in a single ETF, you get exposure to all those companies in one go. No need to track each company individually.
2. Diversification with Just One Investment
One of the biggest benefits of ETFs is diversification. This means your investment is spread across different sectors and companies, reducing the risk.
For instance, buying a Banking ETF gives you exposure to major Indian banks. Buying a Gold ETF lets you invest in gold without physically buying it. With just one unit of an ETF, you’re investing in multiple assets, making it a smart choice for beginners.
3. Low Investment Amount
You don’t need thousands of rupees to start investing in ETFs. Many ETFs in India are priced as low as ₹100-₹500 per unit. This makes ETFs accessible for students, young professionals, or anyone who wants to begin small.
So if you have ₹100 and you’re thinking whether to buy one stock or something better, ETFs might be your answer. You get market exposure without the need to break the bank.
4. Lower Costs Than Mutual Funds
Mutual funds often come with high expense ratios and fund management charges. ETFs, on the other hand, are passively managed, which means they track an index rather than being actively traded by a fund manager.
This leads to lower expense ratios, meaning more of your money is working for you rather than being used up in fees. This is one of the reasons why ETF investing for beginners is highly recommended.
5. Liquidity – Buy or Sell Anytime
Since ETFs are traded on stock exchanges like normal shares, you can buy or sell them any time during market hours. Unlike mutual funds, which are only settled at the end of the day, ETFs give you real-time control over your investments.
This level of liquidity is extremely helpful, especially if you need access to your money quickly.
6. Transparency of Holdings
ETFs are known for their transparency. The composition of an ETF is usually updated daily and is available on the fund’s website. You always know where your money is invested.
This is not always the case with mutual funds, which usually disclose their holdings once a month. As a beginner, this transparency helps build trust and understanding.
7. Tax Efficiency
In many cases, ETFs are more tax-efficient compared to mutual funds. They often generate fewer capital gains due to their passive nature, which means you might pay less in taxes.
Also, long-term capital gains on ETFs (held for more than 1 year) are taxed at just 10% if gains exceed ₹1 lakh, making them a smart tax-saving tool for long-term investors.
8. Wide Range of Options Available in India
ETFs in India are no longer limited to Nifty or Sensex. Today, you can invest in:
- Nifty 50 ETFs
- Banking ETFs
- Gold ETFs
- Silver ETFs
- International ETFs (like US Nasdaq)
- Sectoral ETFs (like IT, FMCG, Pharma)
This wide variety allows investors to customize their portfolios as per their interests and risk appetite.
9. Perfect for Passive Investors
Not everyone has time to watch the market daily. If you want to grow your money without being too active or emotional in your trading, ETF investing is for you. You can just buy and hold.
Over time, ETFs aligned with indices like Nifty 50 or Sensex have shown good returns, making them suitable for passive wealth creation.
10. Beginner-Friendly Platforms to Invest in ETFs
With platforms like Zerodha, Groww, Upstox, and Paytm Money, buying ETFs has become easier than ever. These apps allow you to open a Demat account quickly and start investing in ETFs with just a few taps on your phone.
Most platforms also offer educational resources to help you understand how ETFs work, what their risks are, and how to build a solid portfolio.
Final Thoughts
ETFs are one of the best entry points for beginners in India looking to explore the world of investing. Whether you’re aiming for long-term wealth creation, passive income, or just getting started in the markets, ETFs offer a balanced mix of safety, simplicity, and returns.
So next time you have some extra savings, and you’re wondering what to do with them, remember:
One ETF can give you access to dozens of stocks, at a low cost, with less effort, and better risk management.
Still confused? Consider learning more through certified courses or reach out to investment experts. Better yet, explore institutes like Intonivesh that help beginners understand technical analysis, ETF investing, and stock market strategies in a simple, actionable way.